National Energy Program
The NEP proved to be a highly controversial policy initiative and sparked intense opposition and anger in Western Canada, particularly in Alberta.
The province's premier, Peter Lougheed, was a vocal opponent of the NEP on the grounds that it interfered with provincial jurisdiction and unfairly deprived Alberta of oil revenue.
The policy was repealed by the newly-elected Progressive Conservative (PC) government of Prime Minister Brian Mulroney on June 1, 1985.
In his preamble to the announcement of the National Energy Program, introduced as part of the October 1980 federal budget, Finance Minister Allan MacEachen echoed concerns by leaders of developed countries regarding the recession that followed both oil crises of the 1970s and the "deeply troubling air of uncertainty and anxiety" that was shared by Canadians.
[7] On October 16, 1973, the Ministerial Committee of the Persian Gulf's OPEC membership announced an immediate rise in its posted price from $2.18 to $5.12 per barrel of oil.
[5]: 10 The Yom Kippur War ended in October, but the price of oil continued to increase, and by January 1974, it had quadrupled to US$12 a barrel.
"[5]: 10 The Norwegian economics historian Ola Honningdal Grytten described that period in the 1970s as one of a prolonged global recession and slow growth that affected most developed economies.
The situation changed dramatically in 1947, when Imperial Oil drilled a well near Leduc, Alberta, to see what was causing peculiar anomalies on its newly introduced reflection seismology surveys.
In 1949, Imperial Oil applied to the federal government to build the Interprovincial Pipeline (IPL) to Lake Superior, which allowed it to supply the Midwestern United States.
"[12] The NEB regulated mostly the construction and the operation of oil and natural gas pipelines crossing provincial or international borders.
It "established a protected market for domestic oil west of the Ottawa Valley, which freed the industry from foreign competition,"[attribution needed] and the five eastern provinces, which included major refineries in Ontario and Quebec, continued to rely on foreign imports of crude oil, such as from Venezuela.
The federal government announced this change in policy so that supply problems in the United States would not automatically raise prices for Canadian consumers.
[14]: 2–5 [15][16] In 1975, in response to the world energy crisis, the federal government created Petro-Canada, a Canadian crown corporation that was national oil company.
[12] The federal budget in October 1980 reflected the concern that Canada could "become increasingly dependent on insecure foreign supplies and, therefore, unnecessarily subject to the vagaries of the world oil market.
It provides new impetus to the development of new sources of supply, through direct government programs and through new incentives of particular value to Canadian-owned producers.
"The NEP's goals were "security of supply and ultimate independence from the world oil market; opportunity for all Canadians to participate in the energy industry; particularly oil and gas, and to share in the benefits of its expansion; and fairness, with a pricing and revenue-sharing regime which recognizes the needs and rights of all Canadians.
In 1981, Scarfe argued that by keeping domestic oil prices below world market prices, the NEP was essentially mandating provincial generosity and subsidizing all Canadian consumers of fuel, because of Alberta and the other oil-producing provinces (such as Newfoundland, which received funding by the NEP for the Hibernia project).
"[14]: 6 While the program increased domestic price controls, the emphasis on revenue sharing and incentives for oil exploration on federally owned lands was viewed critically by Alberta Premier Peter Lougheed.
If Alberta reduced production, Central Canada refineries and other businesses would need to purchase foreign oil which would be heavily subsidized by the federal government, a cost that it could not afford to with a $13.7 billion deficit in 1980.
[23] Lougheed finally decided to exercise this authority to force Trudeau to concede some measures of the Program, and Lougheed announced on television a 60,000 barrel reduction to Alberta's production of crude oil to take place over nine months beginning in April 1981, and the suspension of two oil sands projects.
[28] Helliwell et al. (1983) reported that the early 1980s energy price declines prompted the federal and provincial governments to update their revenue-sharing agreements.
[29]: 290 According to Helliwell et al., the NEP made did not in fact cause industry to be significantly exposed to the declining global oil prices, but the largest part of direct revenue losses accrued to governments.
In 1981, the Edmonton economist Scarfe argued that the greatest impact of the NEP was its failure to deliver the revenues that had been originally forecast in the 1980 federal budget.
[26]In inflation-adjusted 2004 dollars, the year the NEP took effect (1980) per capita had fiscal contributions by Alberta to the federal government increase 77% over 1979 levels from $6,578 in 1979 to $11,641 in 1980.
Again in inflation-adjusted 2004 dollars, the year the NEP was terminated (1986) had per capita contributions to the federal government by Alberta collapse to $680, a mere 10% of 1979 levels.
The rationale for the program weakened when world oil prices began a slow decline in the early 1980s and collapsed in late 1985.
With natural resources falling constitutionally within the domain of provincial jurisdictions, many Albertans viewed the NEP as a detrimental intrusion by the federal government into the province's affairs.
[48] Edmonton economist Scarfe argued that for people in Western Canada, especially Alberta, the NEP was perceived to be at their expense in benefiting the eastern provinces.
According to Mary Elizabeth Vicente, an Edmonton librarian who wrote an article on the National Energy Program in 2005, the popular western slogan during the NEP, appearing on many bumper stickers, was "Let the Eastern bastards freeze in the dark.
The anger and alienation of Albertans also led Mr. Lougheed to oppose many of Mr. Trudeau’s proposed plans for the Constitution Act of 1982; he argued against granting Ontario and Quebec veto powers, fought for provincial resource rights and insisted on the notwithstanding clause.
